MINICASE+DIscuss

1 What is the difference between pretax financial income and taxable income? Explain the meaning of temporary and permanent differences. Give at least two unique examples of each (please do not repeat what other students have posted).

2 Discuss different costs of internal and external financing.

3 Your company's CEO has just learned that your firm's equity can be viewed as an option. Why might he or she want to increase the riskiness of the company, and why might other stakeholders be unhappy about this?

4 How can the CEO raise the riskiness of the company using equity v. debt? How will this affect the shareholders?

What are the advantages and disadvantages of using equity v. debt? Let’s discuss!